DIY Investor, 6 May 2021
James Carthew, head of investment trusts, QuotedData
Markets are trying to get to grips with the long term effects of COVID-19 on the global economy, but the prognosis is hard to call. That has led to some volatility this year, which may be a feature of markets for a while yet.
Simplistically, the markets that did best in 2020 were those where the virus was well-managed. That included countries such as China, South Korea and Taiwan. Indeed, JPMorgan China Growth & Income and Weiss Korea Opportunities were amongst the best-performing of all investment companies.
In 2020, investors also favoured growth stories, especially companies in the technology sector. That was good news for specialists such as Polar Capital Technology and Allianz Technology but also for generalist funds with significant technology exposure such as Scottish Mortgage and its stablemate Pacific Horizon (which had a double whammy by also being heavily exposed to those top-performing countries in Asia).
In summary then, 2020 was all about avoiding the worst of the pandemic and buying stocks that COVID-19 either did not affect or were actually boosted by lockdowns.
Towards the end of the year, however, the story started to change. In November, the good news on vaccines gave hope that we could get back to normal. This triggered a big rotation into ‘value’-style stocks, to the benefit of funds such as Temple Bar in the UK.
In 2021, investors are sizing up the potential long-term effects of the vast stimulus that has been injected by governments and central banks. Commentators are talking about the prospect of a global synchronised recovery this year.
China has just reported some spectacular GDP growth figures for the first three months of 2021 (18.3% year on year growth). The figure is distorted by the contraction of that economy in the first quarter of 2020. Nevertheless, China is re-expanding. At the same time, Joe Biden’s economic bail out holds out the prospect of a boom in the US.
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